IN RE MARRIAGE OF POWNALL

Citation197 Ariz. 577,5 P.3d 911
Decision Date09 May 2000
Docket NumberNo. 1 CA-CV 99-0074.,1 CA-CV 99-0074.
PartiesIn re the MARRIAGE OF Evan Joel POWNALL, Petitioner-Appellant, Cross Appellee, and Sherilyn May Pownall, Respondent-Appellee, Cross Appellant.
CourtCourt of Appeals of Arizona

Stanley David Murray, P.C. by Stanley David Murray, Phoenix, Attorneys for Petitioner-Appellant, Cross Appellee.

Musgrove, Drutz & Kack, P.C. by Mark W. Drutz, Grant K. McGregor, John G. Mull, Prescott, Attorneys for Respondent-Appellee, Cross Appellant.

OPINION

PATTERSON, Judge.

¶ 1 Evan J. Pownall (Husband) appeals from the divorce decree finding the parties' premarital agreement invalid and awarding Sherilyn M. Pownall (Wife) an interest in the businesses Husband began prior to the parties' marriage, reimbursement for community income, and attorneys' fees. Wife cross-appeals from the denial of spousal maintenance. For the following reasons we reverse and remand.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 Husband and Wife met in Texas in 1988 and began living together shortly thereafter. In 1990, Husband and Wife moved to Arizona, where he purchased a house in Prescott, paying the down payment and mortgage with his earnings, and taking title in his name only. Husband and his stepfather, doing business as P. & H. Enterprises, subsequently opened four pizza franchise restaurants in which Husband had a one-half interest. Husband used only his earnings to finance the businesses. Wife worked at one of the restaurants for a brief period in 1990, but later found other employment.

¶ 3 Husband and Wife were scheduled to be married on May 28, 1994. Four days prior to the wedding, the parties visited Husband's attorney's office to discuss the premarital agreement. The attorney had prepared the agreement that purported to keep separate Husband's interests in the pizza businesses, as well as any future business interests he might acquire. The attorney explained to Wife that he was only representing the Husband, and that she may want to have another attorney look over the agreement before she signed. Husband offered to hire an attorney for Wife, but she declined. After reading through the agreement with Husband and his attorney, Wife signed the premarital agreement and the couple married as scheduled. Husband filed for dissolution little more than two years later.

¶ 4 During the divorce proceedings, the trial court concluded that the premarital agreement was invalid because Wife was not told and was unaware of the full value of the property subject to the premarital agreement. The trial court concluded that a quasi-marital partnership existed and awarded Wife half of Husband's interest in the pizza businesses, less $15,000 which Husband had contributed to the franchise fee from his separate property. The trial court also awarded Wife $11,916.39 for her share of the 1997 community income, a time during which Husband and Wife were separated. Husband was awarded the residence. The court denied Wife's request for spousal maintenance based on the property award, short duration of the marriage, and Wife's gainful employment. Husband was ordered to pay Wife's attorneys' fees in the amount of $27,383.29.

¶ 5 Husband timely appealed from the decree finding the premarital agreement invalid, the award to Wife of half of his interest in the pizza businesses, reimbursement of the community income, and her attorneys' fees. Wife timely cross-appealed from the denial of spousal maintenance. We have jurisdiction pursuant to Arizona Revised Statutes Annotated (A.R.S.) section 12-2101(B) (1994).

DISCUSSION
Validity of Premarital Agreement

¶ 6 Husband argues that the court incorrectly found the premarital agreement invalid because Wife failed to satisfy her burden of proving it was unconscionable or that she involuntarily executed the agreement. We agree.

¶ 7 Whether a premarital agreement is unconscionable is a question of law. See A.R.S. § 25-202(E)(Supp.1999). This court is not bound by the trial court's decisions on questions of law, and we conduct a de novo review. See Gerow v. Covill, 192 Ariz. 9, 14, ¶ 19, 960 P.2d 55, 60 (1998).

¶ 8 Arizona adopted the Uniform Premarital Agreement Act (U.P.A.A.) in A.R.S. §§ 25-201 to -205(Supp.1999). Parties may enter premarital agreements regarding their rights and interests in the property of either or both parties. See A.R.S. § 25-203(A)(1). Written premarital agreements that are signed by both parties are enforceable "without consideration" unless:

The person against whom enforcement is sought proves either of the following:
1. The person did not execute the agreement voluntarily.

2. The agreement was unconscionable when it was executed and before execution of the agreement that person:

(a) Was not provided a fair and reasonable disclosure of the property or financial obligations of the other party.
(b) Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided.
(c) Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.

A.R.S. § 25-202(A),(C). Thus, in this case, Wife bears the burden of proving the invalidity of the agreement. See A.R.S. § 25-202(C).1

¶ 9 A comment to the U.P.A.A. states:

[T]o determine whether an agreement is unconscionable, the court may look to the economic circumstances of the parties resulting from the agreement, and any other relevant evidence such as the conditions under which the agreement was made, including the knowledge of the other party.

Unif. Premarital Agreement Act § 6, cmt., 9B U.L.A. 377 (1987) (quoting Unif. Marriage & Divorce Act § 306(amended 1973) cmt., 9A U.L.A. 250 (1998)). The standard of unconscionability to be used for purposes of the U.P.A.A. is that used in commercial and contract law. See id. The comment also notes that lack of independent legal counsel may be a factor in determining whether an agreement is unconscionable. See U.P.A.A. § 6, comment.

¶ 10 Maxwell v. Fidelity Fin. Servs., Inc., 184 Ariz. 82, 907 P.2d 51 (1995), also provides guidance in determining what constitutes unconscionability. In Maxwell, the Arizona Supreme Court held that factors indicating procedural or bargaining unconscionability include:

[T]hose factors bearing upon ... the real and voluntary meeting of the minds of the contracting party: age, education, intelligence, business acumen and experience, relative bargaining power, who drafted the contract, whether the terms were explained to the weaker party, whether alterations in the printed terms were possible....

Id. at 89, 907 P.2d at 58 (quoting Johnson v. Mobil Oil Corp., 415 F.Supp. 264, 268 (E.D.Mich.1976)). Factors "[i]ndicative of substantive unconscionability are contract terms so one-sided as to oppress or unfairly surprise an innocent party," as well as "an overall imbalance in the obligations and rights imposed by the bargain...." Id.2 We now examine the facts of this case in light of these factors to determine whether the premarital agreement was unconscionable.

¶ 11 Wife testified that, as early as 1990, Husband mentioned the possibility of a premarital agreement. The record shows that she knew that the purpose of the visit to Husband's attorney's office on May 24, 1994, was to sign a premarital agreement. Although Wife was upset with Husband beforehand for that reason, she accompanied Husband anyway. The subject property is identified as "Schedule A" in the agreement.3 It was also explained by Husband's attorney that the agreement was intended to protect Husband's interests in such property. A spouse's work in a business may not necessarily be community property. That does not make the terms of the agreement unconscionable, and Wife was provided a "fair and reasonable" disclosure of the property involved. Further, Wife knew the lifestyle the income from pizza businesses had provided to her over the years, and she could have independently estimated their value. She also worked in one of the stores for a period of time and was reasonably familiar with the business.

¶ 12 Husband's attorney also made it clear to Wife that he represented Husband only and suggested that she have another attorney review the agreement. Wife stated that she did not need an attorney and refused Husband's offer to hire one for her. She should not be permitted to decline the opportunity to protect herself then later claim that the parties were not on equal bargaining terms. Nor was it Husband's attorney's duty to explain the nature or value of the rights Wife was relinquishing. He explained that he was not her attorney and that he represented only Husband's interest.

¶ 13 Finally, there is no evidence that Wife was compelled to sign the agreement as drafted and presented by Husband's attorney without alteration. Although Wife may have been faced with postponing the wedding, this does not make the agreement involuntary. Therefore, we find the premarital agreement valid and remand for consideration, in light of this determination, other issues not resolved below.

Disposition of Husband's Interest in P. & H. Enterprises

¶ 14 Having found the premarital agreement invalid, the trial court concluded that the parties entered a "quasi-marital partnership" and awarded each party half of Husband's interest in the pizza businesses, less the $15,000 franchise fee Husband paid with his separate property. Having determined that the premarital agreement was valid, we must also consider whether the trial court was correct in concluding that Wife was entitled to an interest in Husband's property based on the theory of a "quasi-marital partnership."

¶ 15 We review the trial court's division of property for an abuse of discretion. See Hrudka, 186 Ariz. at 93, 919 P.2d at 188. The characterization of the property, however, is a conclusion of law which this court reviews de novo. See Gerow, 192 Ariz. at...

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